Inflation has decreased over the past year as the Fed has been raising rates, falling to an annual rate of 3.7 percent in September from a high of 9.1 percent in June of last year.
But annual housing inflation is still around 7 percent and accounts for the vast majority of all the inflation left in the economy.
“If you look at the consumer price index, the big contributor to high inflation is the shelter, both rents and owner-occupied rents,” Claudia Sahm, founder of Sahm Consulting and a former Federal Reserve economist, told The Hill.
“The increases in shelter costs have absolutely slowed down in the past six to eight months, but they take time to work their way through. … Frankly, we’ve gotten surprised at how long it’s taken and how bumpy it’s been.”
The CPI’s shelter index accounted for more than 70 percent of the total increase in all items less food and energy, the Labor Department reported earlier this month.
Americans spend about 30 percent of their income on rent, according to research from Moody’s Analytics published over the summer, a record threshold initially reached last year.
At the same time, 30-year fixed-rate mortgages are near their highest levels in 23 years, at 7.86 percent.
“The impact of higher rates continued to be felt across both purchase and refinance markets. Purchase applications decreased to their lowest level since 1995 and refinance applications to the lowest level since January 2023,” Joel Kan, Mortgage Bankers Association vice president, wrote in a note Wednesday.
The Hill’s Tobias Burns goes further here.
